USA Reality - The Food Bubble.

Reality, in everyday usage, means "the state of things as they actually exist".
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How Wall Street Starved Millions and Got Away With It
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While Goldman Sachs agreed to pay $550 million to resolve a civil fraud lawsuit filed by the SEC, Goldman has not been held accountable for many of its other questionable investment practices. A new article in Harper's Magazine examines the role Goldman played in the food crisis of 2008 when the ranks of the world's hungry increased by 250 million. We speak to Harper's contributing editor Frederick Kaufman.

Frederick Kaufman, contributing editor of Harper's Magazine. Author of the piece The Food Bubble: How Wall Street Starved Millions and Got Away With It from the July 2010 issue of the magazine.

We're talking about Goldman Sachs today, this—they call it a landmark settlement, but they made more after-hours in trading last night(07.16.2010) than they will have to pay. So let's look at Goldman Sachs and its record overall.

FREDERICK KAUFMAN: Yeah, this is really—it's really outrageous. And on a certain level, this reform bill is really a sham, because it does not cover, in any way, shape or form, what Goldman Sachs—and really, let's be honest here, it wasn't just Goldman; it was Goldman, and it was Bear, and it was AIG, and it was Lehman, it was Deutsche, it was all across the board, JPMorgan Chase—what these banks were able to do in commodity markets, really which reached its peak from 2005 to 2008, in what is now known as the food bubble. This is unconscionable what happened, in the sense that their speculation and their restructuring of these commodity markets pushed 250 million new people into food insecurity and starving, and brought the world total up to over a billion people. This is the most abysmal total in the history of the world

wheat generally trades between $3 and $6 per sixty-pound bushel. It went up to $12, then $15, then $18. Then it broke $20. And on February 25th, 2008, hard red spring futures settled at $25 per bushel.... And here's the other outrage of it, which is that at the time that Goldman and these other banks are completely messing up the structure of this market, they've protected themselves outside the market, through this really almost diabolical idea called "replication".
All I have to do is put $5 in. Good-faith promise. And with that $5, I can hold your hundred-dollar position. Well, now I got ninety-five of your dollars. What am I going to do with them? Well, what Goldman did with hundreds of billions of dollars, and what all these banks did with hundreds of billions of dollars, is they put them in the most conservative—no fools, they—they put them in the most conservative investments conceivable. They put it in T-bills. And then what did they do? Well, now that you have hundreds of billions of dollars in T-bills, you can leverage that into trillions of dollars. This is what I'm talking about, large pools of cash for themselves. And then they take that trillion dollars, they give it to their day traders, and they say, "Go at it, guys. Do whatever is most lucrative today." And so, as billions of people starve, they use that money to make billions of dollars for themselves.

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